FDI Outlook 2025: Navigating National Security Reviews in a Transforming Global Landscape

The political landscape in key jurisdictions has undergone significant change, introducing fresh dynamics into FDI scrutiny:

• United States: Following the 2024 presidential election, the Trump administration is expected to focus on many of the same national security concerns that the Biden administration has emphasized. We expect the Trump administration to continue to use the Committee on Foreign Investment in the United States (“CFIUS”) to scrutinize not only Chinese investments in U.S. technology companies, but also investments by non-Chinese companies in certain sensitive sectors.  Whether the Trump administration will use CFIUS in select cases to further domestic industrial policies – as President Biden was perceived to have done in his order blocking Nippon Steel’s proposed acquisition of U.S. Steel – is an open question, but President-elect Trump publicly stated that he, too, would have blocked the U.S. Steel transaction.  The Trump administration will also administer and enforce – and potentially modify – the newly-established outbound investment security program, which is aimed at curbing U.S. investments in the Chinese semiconductor and microelectronics, quantum computer, and artificial intelligence sectors.
• United Kingdom: The new Labour government has signaled a review of the National Security and Investment Act’s implementation. While no radical overhaul is expected, businesses will hope for enhanced transparency in decision-making and guidance on mitigating actions.
• France, Germany, and Italy: Recent and upcoming elections across Europe’s key players bring nuanced shifts. France’s FDI reviews could tighten around AI and quantum technologies under its renewed emphasis on "strategic autonomy." Germany and Italy are likely to refine their frameworks to balance economic openness in times of economic crisis with national security.

New and old governments have to deal with increasing global geopolitical tensions which continue to play a pivotal role in shaping FDI screenings:

• US-China Competition: The rivalry between the US and China persists, influencing outbound investment reviews in addition to inbound FDI. As Chinese investment becomes more difficult in the US, it will seek opportunities elsewhere, including in Europe, despite heightened FDI scrutiny.
• EU’s Strategic Sovereignty Agenda: The EU is advancing its ambition to reduce reliance on non-European suppliers for critical technologies. FDI reviews will likely align with industrial policies, targeting sectors like semiconductors, renewable energy, and telecommunications.
• Transformation in the Gulf: The economic transformation of Gulf states, particularly Saudi Arabia, is driving increased outbound investments by sovereign wealth funds. This surge in activity is expected to draw heightened scrutiny from FDI authorities worldwide, as these funds target critical infrastructure and technology sectors. Partially such investments may even fill the gaps left by the declining Chinese outbound investment in Europe and the US. 

Artificial intelligence (AI) remains at the forefront of the technological development. As AI becomes integral to sectors like defense, healthcare, and infrastructure, regulators are sharpening their focus on acquisitions and investments involving AI capabilities. Expect the following trends:

• AI-specific decisional practice: Most countries only issue very generic and not sector-specific guidance on FDI screening rules. We are therefore not expecting binding guidance addressing AI risks of data misuse, algorithmic control, and strategic dependency. However, in our recent interactions with FDI authorities in multiple jurisdictions we have seen an increasing interest in understanding whether AI solutions or a target company are only integrating “standard/third-party AI algorithms” or self-developed technology that often requires a more detailed explanation. As more and more “AI cases” are notified to authorities, we expect that informal categories of elevated or lower risk categories of AI will develop that can be used to navigate parties in transactions.
• Increased Coordination: Multilateral dialogues on AI-related FDI risks are set to intensify. The G7 has committed to developing joint strategies to address AI risks, particularly in critical infrastructure and defense applications, while the OECD is advancing research on harmonized screening criteria for AI-related investments. These efforts aim to foster consistency and reduce regulatory gaps.

2025 will see new entrants to the FDI screening landscape as well as significant changes in important jurisdictions like Canada:

• Ireland: Ireland’s long-anticipated FDI screening regime came into force on 6 January 2025 with powers to call in for review transactions that closed up to 15 months earlier. Its framework mirrors EU best practices, with a focus on critical technologies and strategic sectors. Investors in technology and pharmaceuticals—key pillars of Ireland’s economy—should prepare for heightened scrutiny.
• Netherlands: The Netherlands have announced to expand its FDI screening law to include emerging technologies such as AI and biotechnology. Just like Ireland, the Netherlands are a hub for many HoldCos in Europe, which makes FDI changes to its screening regime particularly relevant.
• Bulgaria: 2025 marks the first full year in which Bulgaria’s FDI regime will operate comprehensively, reflecting the EU’s broader push for consistent investment screening across Member States.
• Canada: Canada is set to implement mandatory pre-closing filings under the Investment Canada Act (ICA) in 2025. Once in force, investments subject to this mandatory filing requirement will be subject to a minimum 45-day waiting period before closing. This marks a significant shift from the current regime, where notifications can often be filed post-closing.
• Singapore: Singapore has introduced new FDI rules focusing on national security and strategic sectors already last year. 2025 will be the first full year in which the country will have to balance its ambition to further solidify its position as a leading hub for global investment and national security interests.

Beyond the aforementioned headline developments, FDI screening regimes continue to introduce nuanced and sometimes unexpected features: 

• For instance, many jurisdictions capture internal corporate restructurings under their FDI rules, even when there is no change in ultimate ownership. This often surprises businesses that do not anticipate national security reviews for purely internal transactions. 
• Additionally, the imposition of conditions and reporting obligations—such as commitments to safeguard sensitive technologies or ensure supply chain continuity —is becoming increasingly common. These conditions can significantly impact deal timelines and post-closing operations, making it essential for businesses to factor them into transaction planning.

To help parties better understand and notice these pitfalls, we have published a summary of such uncommon features of FDI screening regimes in our article FD I didn’t know that… (Part 1 and Part 2). The considerations in the article will remain highly relevant for the coming year.

While there are several new trends, the basic recipe for businesses to navigate these trends effectively, remains unchanged. Our experience from hundreds of FDI procedures globally shows that businesses are usually more successful when dealing with FDI screenings as follows:

1. Anticipate Regulatory Focus: Understand the evolving priorities in key jurisdictions, particularly in sensitive sectors like AI, semiconductors, health and defense. 
2. Engage Early with Regulators: Proactive engagement can help address concerns and facilitate smoother review processes.
3. Monitor Global Trends: Keep abreast of multilateral efforts and new FDI regimes to ensure compliance and strategic alignment, and involve FDI advisors early on in your transaction process. This is particularly important in view of increased regulatory scrutiny of transactions involving individuals or entities from sanctioned jurisdictions.